Increase planned for medical costs

WASHINGTON --More and more Medicare beneficiaries would have to pay higher premiums for coverage of prescription drugs and doctors' services under President Bush's 2008 budget, to be unveiled tomorrow.

Single people with annual incomes over $80,000 and married couples with incomes over $160,000 already have to pay higher premiums for the part of Medicare that covers doctors' services. The income thresholds rise with inflation.

Budget documents show that Bush will propose a similar surcharge on premiums for Medicare's new prescription drug benefit. In addition, the president will ask Congress to "eliminate annual indexing of income thresholds," so that more people would eventually have to pay the higher premiums.

The proposal, expected to raise $10 billion over the next five years, is one of many advanced by Bush in a $2.8 trillion budget that aims to eliminate the deficit by 2012.

In his budget request, Bush expresses alarm about what he calls "the unsustainable growth of federal entitlement programs," and he proposes savings in Medicare and Medicaid that far surpass what he or any other president had sought.

The president contends that he can make the rule changes without any action by Congress. But Congress could try to block some or all of the changes.

Democrats immediately denounced the proposals. "This is exactly the wrong approach," said Sen. Hillary Rodham Clinton of New York, who cited the proposals as evidence of what she called "the president's misplaced priorities."

Many Republicans like the idea of an "income-related premium," saying affluent beneficiaries can afford to pay a larger share of Medicare's costs. Democrats are divided. Some see it as a progressive way to finance the program. But others say it is fundamentally at odds with the idea of social insurance, and they fear that it could prompt some wealthy people to leave Medicare.

Administration officials said last week that Bush would ask Congress to squeeze more than $70 billion from Medicare and Medicaid over five years. But the budget documents show that the actual figure is much larger: $101.5 billion of savings over five years.

The president's budget includes legislative proposals that would save $78.6 billion over the next five years - $65.6 billion in Medicare and $13 billion in Medicaid.

In addition, the budget documents say that Bush will propose changes in federal regulations to save $22.9 billion more over the next five years: $10.2 billion in Medicare and $12.7 billion in Medicaid.

Lobbyists for hospitals, nursing homes and other health care providers plan a huge campaign to kill the president's proposals, which they say will harm beneficiaries.

Bush said his proposals would just slow the growth of the programs. "Our budget reduces Medicare's average annual growth rate over five years to 5.6 percent, from 6.5 percent," Bush said, while Medicaid would grow 7.1 percent a year instead of 7.3 percent.

Bush has proposed trimming Medicare payments to health care providers for a few years, but now he proposes to make the cutbacks permanent, so that hospitals and nursing homes would never receive a full update for inflation.